A Soyuz rocket lifts off from the Guiana Space Center on August 22, carrying two Galileo navigation satellites. While initially hailed as a successful launch, European officials later acknowledged the rocket's upper stage placed the two satellites in the wrong, and potentially useless, orbit. (credit: ESA)

The unsettled launch industry

by Jeff FoustMonday, August 25, 2014

To the average person, a launch is an exciting event: a spectacle of fire and thunder as the rocket lifts off and ascends into the sky at an ever-increasing speed. To many customers of those launches, a launch can instead be a nerve-wracking event: hundreds of millions of dollars, and years of work, are sitting atop that controlled explosion. No doubt many commercial launch customers—who are not really in the space business but, rather, in the communications business—would be happy to trade in that spectacle for something less visually compelling but with a higher probability of success.

Since the early 2000s, the commercial launch market has been dominated by three companies: Arianespace, ILS, and Sea Launch. Now, all three are facing challenges.

And, in recent months, the overall commercial launch industry has itself gotten a little more nerve-wracking for those involved in it, or customers of it. Demand for launches has remained relatively flat, particularly in the primary market of geostationary communications satellites. However, more launch providers have been trying to get into the market, leading to what some in the industry fear to be a case of overcapacity, with consequences for established and emerging firms alike.

Problems for the big three

Since the early 2000s, the commercial launch market has been dominated by three companies: Arianespace, International Launch Services (ILS), and Sea Launch. Combined, those three providers accounted for the vast majority of commercial launches, particularly to GEO, with only a handful going to other launch providers. Now, all three are facing challenges.

For two of the three, those problems are leading to cutbacks. In early August, ILS, a US-based company that sells launches of the Russian Proton rocket, announced it was laying off a quarter of its staff. The company said the layoffs were linked to an anticipated decline in demand for the Proton in the commercial market.

“This level of staffing is appropriate for our current backlog and our customers will continue to be well-supported,” said ILS president Phil Slack in an August 4 press release. “Previous staffing was consistent with planning for 7–8 launches per year. We are now targeting for 3–4 missions annually.”

This decline in demand is, at least in part, a self-inflicted wound. The Proton rocket has suffered several launch failures in recent years, although on Russian missions as opposed to commercial ones sold by ILS. The most recent failure, in May, caused the loss of the Express AM4R communications satellite, which fell to Earth after the Proton’s third stage malfunctioned. The Proton has not launched since then, and its return to flight, on a Russian government mission, is not expected until late September or October.

Sea Launch, another of those three major launch providers, is also struggling. On Friday, the company—majority owned by Russia’s RSC Energia but with its headquarters in Switzerland and launch operations based in Long Beach, California—announced “staff reductions” of its own. The company didn’t disclose how many people would be laid off, other than the layoffs would take place both in Switzerland and California. Sea Launch said it would also be temporarily “laying up” the two vessels it uses to perform launches to reduce its costs.

The company blamed a “manifest gap,” or lack of launches planned for the near future, for those moves. Sea Launch performed its first launch since an early 2013 launch failure in May, successfully placing a Eutelsat communications satellite into orbit. However, the company had no missions under contract through next year, although the company says it can support launches as soon as mid-2015.

“In light of this gap in our launch manifest, Sea Launch is taking the opportunity to pursue all prudent business solutions to realize significant cost savings in labor, maintenance and fuel while maintaining the capability to call-up the vessels as needed,” Sea Launch CEO Sergey Gugkaev said in Friday’s announcement. “Sea Launch continues to aggressively market all available launch opportunities beginning in mid-2015 and will maintain a short launch call-up readiness state.”

A contributing factor to both ILS’s and Sea Launch’s woes may be current geopolitical tensions involving Russia. That’s a potentially very acute problem for Sea Launch, whose Zenit-3SL rocket uses lower stages built in Ukraine. Neither company, though, has indicated that those tensions have affected business, including the loss of any launch contracts.

“Given this new situation, the European space agency must become more agile, and move towards more integrated structures,” said Safran’s Fournereaux.

The other “big three” launch provider, Arianespace, has built its reputation on a track record of success. Its flagship launch vehicle, the Ariane 5, has an unparalleled record of success: the most recent Ariane 5 launch, of the ATV-5 cargo spacecraft to the International Space Station last month, was the 60th consecutive successful launch of that vehicle, a streak going back more than a decade. At the same time, Arianespace has sought to diversity its launch capabilities: it now offers the small Vega launch vehicle and the medium-class Soyuz, all launching, like Ariane 5, from French Guiana.

Now, though, even that sterling reputation for success is tarnished. On Friday morning, a Soyuz rocket carrying the first two operational Galileo navigation satellites lifted off from French Guiana. Nearly four hours later, the rocket’s Fregat upper stage released the satellites after performing the second of two planned engine burns. Arianespace and ESA declared the launch a success. “The Galileo program has just reached a major milestone: it is a great day for European space and a great day for Europe,” said Arianespace chairman and CEO Stéphane Israël in a post-launch press release.

By Friday evening, though, it was clear it was no longer a great day. Tracking data from US Strategic Command appeared to show that the two Galileo satellites were not in their planned circular medium Earth orbit, but instead in elliptical orbits with a different inclination. Late Friday evening, Arianespace confirmed there was an “orbital injection anomaly” with the launch.

In a statement Saturday, Arianespace said that the anomaly was linked to the Fregat upper stage, but offered no other details. (Some independent analysts noted the orbit the Galileo satellites are in could be explained if the Fregat fired for its planned length, but was mis-oriented by as much as 180 degrees.) Israël said in the statement that Arianespace, ESA, and the European Commission would convene an independent board on Monday to begin the investigation into the incident.

Even without the shadow cast by a launch failure, Arianespace was aware of the increasing competitive pressures it was facing in the market. In June, Airbus Group and Safran, the two largest shareholders in Arianespace, announced plans to consolidate their launch vehicle businesses into a 50–50 joint venture. Airbus Defence and Space is the prime contractor for the Ariane 5, while Safran provides the cryogenic main engine for the rocket. The joint venture will play a major role in shaping Ariane’s future, including plans—yet to be finalized—for the Ariane 6.

A Safran executive cited competition from other launch providers as a major reason for the merger. “Given this new situation, the European space agency must become more agile, and move towards more integrated structures,” said Jean-Lin Fournereaux, vice president of space for Safran. “Airbus and Safran have the same vision in this area, namely to develop lower-cost, more modular launchers.”

Upstarts’ startup issues

While a number of organizations are seeking to enter, or in some cases re-enter, the commercial launch market, the one that attracts the most attention is SpaceX. Its lower launch prices—now just over $60 million for a Falcon 9 launch—has attracted business from a number of commercial customers. While SpaceX initially made inroads with smaller satellite operators, like AsiaSat and Thaicom, it’s now winning business from larger operators as well: last month Inmarsat announced it would launch up to three satellites on SpaceX’s Falcon 9 or Falcon Heavy launch vehicles.

“At this point, I can say five more launches of the Falcon 9 this year,” said SpaceX’s Dreyer atfer the company’s most recent launch.

SpaceX, though, has been challenged to carry out the launches already on its manifest. Earlier this year, the company said it planned to perform ten launches in 2014. However, it completed only two in the first half of the year, and two more since: an ORBCOMM launch in mid-July and an AsiaSat launch early in August. Its next launch, also for AsiaSat, is planned for 12:50 am local time Wednesday from Cape Canaveral.

Despite that slow start, SpaceX officials remain confident that they can still get most of those ten planned launches done this year. “At this point, I can say five more launches of the Falcon 9 this year,” said Lauren Dreyer, director of business affairs of SpaceX, during a launch industry panel session at the AIAA Space 2014 conference in San Diego earlier this month, immediately after the most recent Falcon 9 launch. She noted the ORBCOMM and AsiaSat launches took place 22 days apart; that same separation will hold true if the next mission launches as scheduled this Wednesday.

SpaceX has also experienced some growing pains as it ramps up to meet that commercial and government demand. Last month, the company confirmed it had let go of a small fraction of its workforce—less than five percent, according to a company statement—after an annual review. Those dismissals were widely reported as layoffs, though.

“We did our annual performance review, there were some low performers, and we terminated them,” SpaceX president Gwynne Shotwell said after an appearance on a panel at the NewSpace 2014 conference in San Jose, California, on July 26.

However, two of those terminated employees have since filed suit in California courts, claiming that they were laid off and not given proper notification. Under state and federal Worker Adjustment and Retraining Notification (WARN), any mass layoff of employees required 60 days’ advance notice, which the company did not provide. However, WARN notices are typically not required if employees are terminated for cause.

SpaceX is facing other lawsuits about its employment practices as well. In one, a former employee claims that the company did not provide required rest periods and meal breaks during shifts. In another, two former employees alleged SpaceX was “fostering a racist working environment.” The company has denied the allegations. At least some of those employees filing suit are among those who were terminated by the company last month.

Another company trying to take a bigger share of the commercial launch market is Orbital Sciences. It has won commercial contracts in the past for its smaller rockets, including Pegasus and Taurus, but is now trying to win business for its larger Antares rocket, which launched most recently last month (see “Getting to love logistics on the space station”, The Space Review, July 14, 2014).

In a conference call with financial analysts July 17, after the release of its latest quarterly earnings reports, Orbital president and CEO Dave Thompson confirmed that the company had submitted two bids for Antares launches not linked to its current NASA business. “So we have two proposals outstanding but those are for, if we were to be selected, those would be for missions between late 2016 and early 2018,” he said, adding he expected decisions from those unnamed customers before the end of the year.

Those proposals come as Orbital weighs plans to re-engine the Antares first stage. The rocket currently uses AJ26 engines from Aerojet Rocketdyne, which are “Americanized” versions of NK-33 engines from Russia. There are enough AJ26 engines in hand by Aerojet Rocketdyne to handle Orbital’s current backlog of Antares missions, but Orbital has indicated an interest in replacing those AJ26 engines with alternative designs—including, possibly, solid motors from ATK, with whom Orbital is in the process of merging.

“I think we’ve got a really good approach that I am happy with,” Thompson said of a new engine for Orbital’s Antares. “And that should be solidified here very shortly.”

“We are currently in the throes of a first-stage propulsion decision for the long term for Antares,” John Steinmeyer, senior program manager at Orbital, said at the AIAA Space 2014 panel. “We knew early on in the program that there was a limited supply of those [AJ26] engines, so we have been searching for an alternative solution, both globally and domestically.”

Neither Steinmeyer, at the AIAA panel, nor Thompson, in the earnings call, would say when Orbital would make that decision, other than it would come in the relatively near future. “As we discussed back in April at the first-quarter call, we at that point said that we thought we would be in a position to make a propulsion system decision in three or four months and I think we are right on track to do that,” Thompson said last month. “We are very close to doing so now. I think I know which way it is going to go.”

“We have a few more things that have to be verified but I think we’ve got a really good approach that I am happy with,” he added. “And that should be solidified here very shortly.” Thompson didn’t disclose whether the launch contracts it’s competing for would use that re-engined Antares.

Combined, all those developments make the commercial launch industry a little unsettled after a long period of relative stability. It may, in fact, make a launch seem positively relaxing by comparison.